Stock Advisor Portfolio Management Strategies

Question 1

What is 'asset allocation' in portfolio management?

Accepted Answer

Distributing investments across different asset classes like stocks, bonds, and cash

Answer

Selecting individual stocks to buy

Answer

Reinvesting dividends automatically

Answer

Choosing a brokerage account type

Question 2

What is 'diversification' meant to achieve in a portfolio?

Accepted Answer

Reduce unsystematic risk by spreading investments across different securities

Answer

Maximize short-term gains

Answer

Concentrate holdings in the best-performing sector

Answer

Ensure all investments move together

Question 3

What does 'rebalancing' a portfolio mean?

Accepted Answer

Adjusting holdings back to target allocation percentages after market movements

Answer

Selling all positions and starting fresh

Answer

Adding new funds to underperforming assets only

Answer

Switching brokerages to reduce fees

Question 4

What is 'dollar-cost averaging' (DCA)?

Accepted Answer

Investing a fixed dollar amount at regular intervals regardless of price

Answer

Buying stocks only when prices hit 52-week lows

Answer

Converting foreign currency gains into dollars

Answer

Averaging analyst price targets to set a buy price

Question 5

What is a 'benchmark' used for in portfolio management?

Accepted Answer

A standard index used to measure portfolio performance

Answer

Setting a stop-loss level

Answer

The minimum investment required

Answer

A risk-free rate of return

Question 6

What does 'alpha' represent in portfolio management?

Accepted Answer

The excess return of a portfolio relative to its benchmark

Answer

Total portfolio return

Answer

The risk-free interest rate

Answer

The volatility of a portfolio